What’s behind Tesla’s charm offensive

Sly as a fox.
Sly as a fox.
Image: Reuters/Danny Moloshok
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Elon Musk and Tesla have been engaged in quite the PR offensive lately.

Today, the electric vehicle company announced a slew of upgrades to its entry level Model S sedan (which is now in its third year of production). On April 3, there was the surprise early announcement about a record quarter for Model S deliveries.

Last month was also particularly eventful. Elon Musk held a press conference, unveiling software updates designed to eliminate the problem of “range anxiety” (concern that the car will run out of power far from a charging station). At the event, Musk also teased a looming update that would include autonomous driving functionality to its cars, such as self-steering on long highways.

Musk also tweeted about a looming product announcement for the end of the month (despite his denials, when Musk tweets about Tesla, it usually lifts the stock price).

So why the publicity flurry?

For one thing, Tesla overhauled its public relations team late last year. Maybe the new team is simply being more proactive about getting good news out there. That’s only its job, after all. Or maybe it just reflects the reality that Tesla, a company in hyper-growth mode, simply has a lot going on.

Or maybe there is a deeper explanation.

Tesla is a highly volatile stock. The company isn’t making money at the moment, and opinions among investors are split between the highly ebullient and the viciously skeptical.  The share price is so sensitive to headlines that its public relations strategy takes on added importance. The surprise announcement on deliveries was made to combat inaccurate” information being spread by short sellers.  As Stifel auto analyst Jamie Albertine explained to investor clients this morning.”Tesla appears focused on retaining the ball in the battle for headline catalyst news flow”.

Wining the PR war is particularly important if the company needs to raise more capital from investors to fund its aggressive expansion plans this year. The Wall Street Journal’s Heard on the Street column (paywall), for one, thinks this is likely.

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Remember, Musk admitted in February that Tesla plans to spend staggering amounts of money on capex in 2015 ($1.5 billion is the forecast). Since the company is expected to lose more money this year, and only has $1.9 billion of cash on its balance sheet, it might need external funding to pay for it.  ”We don’t comment on speculation,” Tesla spokesman Ricardo Reyes told Quartz.

A good time for a company to raise new equity is when its share price is strong (because issuing new shares dilutes existing stockholders and usually pressures the share price). Of course, Tesla could instead raise debt, or like last time, issue debt that could eventually convert into equity.

Tesla timed its last capital raising perfectly—it coincided with then record levels in the stock price—and came amid highly optimistic commentary on Wall Street about the company’s potential (some of that coming from one of the firms that underwrote the convertible debt issue). This is worth keeping in mind as the Tesla newsflow picks up.